India Weekly Market Update January 16, 2009
The second wave of the financial crisis dealt another blow to investors’ confidence as large banks suffered huge quarterly losses during the fourth quarter. Fear and panic erupted among investors as Bank of America and Citigroup reported fourth quarter losses. Citigroup posted a loss of US$8.29 billion, while Bank of America (BoFA) registered a net loss of US$1.79 billion. The US Federal Reserve provided US$20 billion to BoFA, enabling the bank to completely absorb Merrill Lynch. The slowing economy also led to a 2.7 percent decline in total retail sales in December, adding to the bearish sentiment. The UK government is pondering a second bailout package for banks, as the nation’s financial system struggles to recover. The weaker European economy enabled the European Central Bank (ECB) to cut the refinance rate by 50 basis points to 2.0 percent. The US and UK benchmark indices, the Dow Jones Industrial Average (DJIA) index and the FTSE100, declined 3.7 percent and 6.8 percent, respectively, due to the weak economy. Six out of seven Asian indices closed in red during the week ended January 16—Shanghai SE Composite, the Chinese benchmark index, was the lone exception, ending the week 2.6 percent higher. An upward revision of 2007 GDP growth to 13.0 percent from the earlier estimate of 11.9 percent turned the sentiment positive. India’s benchmark index, the BSE Sensex, declined a marginal 0.88 percent as the slowdown in corporate earnings had a negative impact on the broader market. The rupee depreciated 1.12 percent during the week ended January 16 as foreign investors withdrew money from Indian bourses.
On the commodities front, crude oil prices continued to slip, falling 12.3 percent to close at US$35.8 a barrel during the week ended January 16. Crude oil prices had declined 11.9 percent the previous week.
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